Gold surges after Brexit becomes reality

New Delhi, June 24 (IANS) World equity markets plunged, sterling fell to a 31-year low against the dollar but gold price surged after Britain decided to opt out of the European Union (Brexit), World Gold Council said on Friday.

"The gold price surged to $1,313.85/oz on Friday morning, up 6 percent from Thursday, providing investors with a much needed safe haven. Sterling is trading at a 31-year low and world equity markets have plummeted," the Council said in a release.

According to the Council, soaring gold price has had a positive impact on gold miners too with Britain-listed gold miners up 10-20 per cent this morning.

The Council said in order to insulate shocks, if central banks are forced to implement supportive measures which will likely to come in the form new rate cuts or delays in planned hikes, gold demand will get a boost.

"We expect to see strong and sustained inflows into the gold market driven by the intense market uncertainty that now faces the global markets. Gold ETF holdings have also been increasing sharply, a trend we expect to see accelerate, as both retail and institutional investors re-allocate funds to gold," it said.

There has already been a sharp uptick in activity on the Shanghai Gold Exchange. "We could also see an increase in central bank purchases of gold," it said.

During the European sovereign debt crisis, gold prices rose by 12 percent as fears of a widespread meltdown increased. "Today's risks are arguably greater. There is a reason why the world's central banks hold so much of their national wealth in gold," the Council said.